Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of 2014 are: Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April 2014 sales is projected at 4,500 boxes.
What is the expected sales revenue for March?
A) $15,000
B) $21,000
C) $19,500
D) $4,500

Question

Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of 2014 are:  Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April 2014 sales is projected at 4,500 boxes.
What is the expected sales revenue for March?
A) $15,000 
B) $21,000 
C) $19,500 
D) $4,500

Quizplus · Accepted Answer

To calculate the expected sales revenue for March, we need to first calculate the number of boxes that will be sold in March.

Ending finished goods inventory for February = 20% of March sales = 1,800 units (i.e. 0.2 x 9,000)

Total units available for sale in March = Ending finished goods inventory for February + Estimated sales for March = 1,800 + 10,800 = 12,600

Therefore, the expected sales revenue for March = Total units sold in March x Price per box = 10,800 x $5 = $54,000

The correct choice is C) $19,500 is incorrect, as this is the expected cost of goods sold for March, not the revenue. $21,000 is incorrect, as it assumes that all 12,600 units will be sold in March, which is not the case. $4,500 is the projected sales for April, not March.

Foremost Corporation Manufactures Boxes